Wall Street Surges as Job Openings Decline, Boosting Expectations of a Fed Rate Hike Pause
Wall Street experienced a significant surge on Tuesday, propelled by the strong performance of megacap growth stocks such as Tesla and Nvidia. The rally was fueled by a drop in monthly job openings, which solidified expectations of a pause in interest rate hikes by the US Federal Reserve.
The S&P 500 recorded its most robust one-day gain since June 2, while the Nasdaq achieved its strongest session since July 28. Both indexes closed at levels not seen in over two weeks, creating an optimistic atmosphere among investors.
The surge in stock prices followed the release of the Labor Department’s Job Openings and Labor Turnover Survey (JOLTS) for July. The report indicated that job openings had fallen for the third consecutive month, reaching 8.827 million. This decline signaled a reduction in labor market pressures, contributing to the growing belief that the Federal Reserve will hold off on further interest rate hikes.
Another report from the Conference Board revealed a decline in consumer confidence in the United States. The index fell to 106.1 in August, significantly lower than the expected 116. The combination of a shrinking labor market and weakened consumer confidence has bolstered expectations that the Federal Reserve will maintain the current interest rates during its September meeting.
Interest rate futures indicate an 87% probability that the Fed will keep rates steady in September and a 54% probability of rates remaining on hold through November, according to the CME Group’s FedWatch tool. This sentiment has prompted investors to reenter the stock market, with a growing belief that interest rate hikes are a thing of the past.
The declining yields on Treasury notes have also played a role in bolstering growth stocks. The yield on the 10-year Treasury note eased to 4.11%, while the two-year note fell back below 5%. This favorable market condition supported the stocks of companies like Nvidia, which climbed 4.2% to reach its highest ever closing price.
Tesla, despite facing questions from a US regulator about changes to its Autopilot software, rallied 7.7%. The impressive performance of both Nvidia and Tesla led to considerable trading volume, with over $33 billion traded in each stock.
Alphabet, the parent company of Google, received a 2.7% boost fueled by the announcement of new artificial intelligence technology and partnerships.
Overall, the S&P 500 increased by 1.45%, closing at 4,497.63 points. The Nasdaq also experienced a gain of 1.74%, reaching 13,943.76 points, while the Dow Jones Industrial Average rose by 0.85% to 34,852.67 points.
All 11 sectors within the S&P 500 posted gains, with communication services leading the way with a 2.46% increase, followed by a 2.35% gain in consumer discretionary stocks.
While Wall Street celebrated the positive market performance, investors are eagerly awaiting the release of the July non-farm payrolls report, which will provide further clarity regarding the labor market’s state. Additionally, attention will be directed towards the personal consumption expenditures index, the preferred inflation gauge of the Federal Reserve, due on Thursday.
The absence of any hawkish surprises in Federal Reserve Chair Jerome Powell’s comments at the recent Jackson Hole symposium further bolstered the stock market on Monday. Now, the focus is shifting towards upcoming economic data to determine how long the central bank may choose to keep interest rates elevated.
In other market news, Catalent, a contract drugmaker, experienced a nearly 5% jump in share price after reaching a settlement with activist investor Elliott Investment Management to conduct a review. Telecommunication giants Verizon and AT&T also saw gains of over 3% following an upgrade by Citi from neutral to buy.
Furthermore, US-listed shares of PDD Holdings, a Chinese e-commerce firm, rallied over 15% after surpassing second-quarter revenue estimates.
The positive performance in the market was evident as advancing issues heavily outnumbered falling ones within the S&P 500.
In conclusion, Wall Street celebrated a significant surge as job openings declined, strengthening expectations of a pause in interest rate hikes by the Federal Reserve. The impressive rally, led by megacap growth stocks such as Tesla and Nvidia, was fueled by a shrinking labor market and diminished consumer confidence. As the economic data unfolds, investors eagerly anticipate further insights into the state of the labor market and the potential trajectory of interest rates.
